make more money by creating more value

Summary

is your business growth focused on value or only on revenue? this is the question that separates companies that last from companies that die quietly.

1. Blockbuster’s downfall is the case study. they were obsessed with revenue. late fees, rewind fees, restocking fees. every fee was a knife in the customer’s back. Netflix walked in offering no late fees and Blockbuster was dead within a decade.

2. small example I watched up close. a friend in fitness shifted from monthly billing to four-week billing cycles. on paper, an extra billing cycle per year, more revenue. in reality, customers felt cheated, churned out, and the business shrank. clever beat them.

3. the question isn’t “how do I extract more from each customer.” the question is “what would make each customer want to give me more on their own.”

4. revenue tactics without value increases are a trap. they always show up first in the spreadsheet. they show up later in the customer count.

5. if you want more money in the business, build something they want more of. then ask for the price that matches. value first, revenue follows. flip the order and you’re Blockbuster. try harder.

Transcript

introduction

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. Is the growth of your business focused on value or is it only focused on revenue? You’re going to find out today. This is the Better Human Business Podcast. I’m Jerred Moon. And before we get into it, I want to urge you to go sign up for the Try Harder newsletter.

You can go to jerred.com, J-E-R-R-E-D.com, sign up for the newsletter. I’d love to have you there, putting a lot of value in there, a lot of responses, a lot of people getting back to me with a lot of great feedback on the newsletter. I’d love to have you there. If you’re not there already, go subscribe to the newsletter.

the story of blockbuster and netflix

All right, let’s talk about why you don’t want to be Blockbuster. So legend has it that Netflix came to Blockbuster when they were first getting started and they wanted Blockbuster to be an investor. And long story short, Blockbuster laughed Netflix off and did not invest. If you don’t know about Blockbuster, maybe you’re too young to have experienced that.

So Blockbuster was on basically every block in the United States. You could rent VHS tapes. I think they made it into the world of DVDs right at the beginning. But you could rent VHS tapes and DVDs from Blockbuster and you could have it for two to three days and then you could bring it back. They were the big hit before Netflix or Redbox or anything else came on.

Now everything has a streaming service, right? That’s what Blockbuster was. They were the king of the castle. Then Netflix comes around with an idea. Originally, Netflix wasn’t just a streaming service. They were sending out, they would mail DVDs to people. You’d go on, you’d select which DVDs you want.

why customers hated blockbuster’s model

They’d mail it to you. They’d say, hey, send it back whenever. We don’t care. Just you can’t have any more until you send that one back. Pretty cool business model. And then eventually it evolved into the streaming service. And anyway, so Netflix came to Blockbuster, wanted to be an investor, and Blockbuster completely missed out.

They laughed them off, thought it was a bad idea. Nobody wanted to do what Netflix was trying to do. And the point of that story is not actually what happened to Blockbuster. If you can have big opportunities come your way and you can miss out on them, maybe it’s a good idea. Maybe you don’t. And I’m sure we all have those things that we, maybe you wish you listened to your friend about investing in Bitcoin 10 years ago.

We all have these little things like missed opportunities that could have happened. But that, in my opinion, that’s not why Blockbuster died. And this is why you don’t want to be Blockbuster. If you were a part of Blockbuster back in the VHS days, like I was, a couple of things could happen to you if you rented a VHS from Blockbuster.

example of the four-week billing cycle strategy

Say I rented it for two or three days and I bring it back on the fourth day, guess what I get? I get a late fee. Like a library. I get a late fee. I get to pay some late charges. And if it’s like a week more, a week late, you get to pay even more late fees for returning in this VHS tape late. Now the second thing that could happen was, what if I was in a hurry and I forgot to rewind the VHS?

Again, showing my age here because a lot of you probably never even touched a VHS tape in your life. But what if you forgot to rewind it? If you forgot to rewind it, there was a rewind fee. So you could get hit with a rewind fee and you could get hit with a late charge fee. You know what that’s making me do or any customer do?

That’s making them hate you. Yes, you’re the biggest game in town, so they’ll pay it. We’ll pay it, right? We’ll pay that fee. But you’re an asshole. You’re charging for things that you don’t really need to charge for. Like you already have a 16 year old kid who’s just going to throw that tape as a part of their hourly service anyway that they’re getting paid into a rewind machine and rewind it, right?

focus on creating value, not just revenue

It’s unnecessary. But some genius at Blockbuster had an idea on how to grow revenue. They’re focused on revenue. They’re not focused on value. You starting to see how this plays out when you start getting focused on revenue instead of value. So for example, I had a friend in the fitness industry. I run garagegymathlete.com.

We charge a set fee per month. Every single month you get charged a low amount for our workouts. My friend had this awesome idea. He was like, he was very similar. He’s like, hey, I’m doing what you do. I charge once a month, but I’m going to change to every four weeks. I’m going to change my customer’s billing cycles to every four weeks.

And so instead of 30 days, I’m going to charge every four weeks and you might be asking your self, what’s the difference? If I charge once a month, that’s 12 billing cycles across all customers. If I charge every four weeks, that’s actually 13 billing cycles per year. So 52 weeks in a year divided by four, it’s going to be 13 billing cycles.

the bottom line

So you get an entire another billing cycle out of your customers. If you charge at the four week interval, as opposed to once a month, but you know what happened when he did that? He didn’t think it’d be a big deal. He thought he’d just go in and change all of his customers from 30 days, four weeks, but he changed them to 30 days, four weeks, and they were pissed off.

He lost hundreds of customers over the next couple of months before he eventually switched it back, apologized. Now he’s a month to month business. The point of me telling you all this is that growth strategies in business should be about an exchange of value. Anytime you’re thinking about how can I make more money in my business, you should be leading with value.

You should be thinking about value. What additional value are you bringing? If you’re looking to make more revenue, what problem are you solving? Because once you start finding clever ways to bill your customers or extra ways to charge them and you’re adding no additional value, I hate to be the one to break it to you, but your business is already dying.

You just don’t know it yet. Like seriously, if you think charging your customers these weird one-off charges or for late fees or rewind fees or whatever clever thing you might think of that you’re doing in your business and it bumped your revenue up 15% last month, wow, you’re a genius, but guess what?

There’s someone down the street, your competitor, who’s not doing that thing and you know what? You probably pissed your customer off. You don’t know that you pissed them off. They probably won’t say anything. They’re just going to leave, go somewhere else and then also tell their friends how shitty you run your business.

Just some things to think about as you’re looking to grow. If you’re not leading with value, you’re just looking for clever ways to charge people more money without any additional service or value, your business is already dying. So if you want to make more money, try harder.